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Crafting a redevelopment agreement for Twin Peaks Mall took an intense 2 1/2 months of negotiations

Developer: City put in many conditions to protect itself

By Tony KindelspireLongmont Times-Call

Posted:
01/26/2013 07:45:36 PM MST

Updated:
01/26/2013 07:48:01 PM MST

Benchmarks required of NewMark Merrill Mountain States

Leases or sales agreements must be signed with:

A large-format general merchandise retailer that will occupy at least 100,000 square feet and that is projected to generate at least $400 of taxable sales per square foot.

A stadium-style movie theater with a minimum of 12 screens with at least 50,000 square feet that is projected to generate at least $35 of taxable sales per square foot.

A natural grocer that will occupy at least 28,000 square feet and is projected to generate at least $540 of taxable sales per square foot; or a letter of intent from a natural grocer that will occupy at least 25,000 square feet plus leases from other tenants that will occupy at least 22,500 square feet in the "Village" portion of the project, 10,000 square feet of which much be occupied by restaurants.

Also:

With the exception of the aforementioned retailers, 80 percent of the rest of the tenants must be new to Longmont.

Proof of construction loans sufficient to complete the project.

Construction must begin by Dec. 31, 2013. One six-month extension is allowed, in the event of extenuating circumstances beyond the developer's control.

LONGMONT -- You could call it a marriage. And the prenup is 47 pages long.

That's the length of the Redevelopment and Reimbursement Agreement outlining the partnership between the city of Longmont and NewMark Merrill Mountain States on the plan to redevelop Twin Peaks Mall.

This isn't the first time NMMS has been to the altar with a local municipality for a retail redevelopment, but Longmont city officials apparently demanded quite the dowry, according to the developer.

"When you look across Colorado, they've negotiated more conditions in an agreement like that than I've seen -- to protect the community," said Allen Ginsborg, NMMS managing partner. "Normally, we would've pushed back on having so many conditions, but we're OK with it."

NMMS has a whole list of benchmarks that must be met before the city puts any money into the deal. Those conditions include NMMS landing a signed lease with a "general merchandise retailer" that will occupy at least 100,000 square feet. (Ginsborg has stated his company already has one lined up.) Also required are a firm commitment from a company to build a state-of-the-art movie theater with at least 12 screens, and from a natural grocer that'll take up about 28,000 square feet.

A guarantee of construction loans and NMMS agreeing to a timetable are also part of the agreement.

"We wanted to make sure the developer was providing the amenities that the community has been talking about," said David Starnes, the city's redevelopment program manager.

NMMS plans to demolish the entire mall except for the Dillard's building, which will become a stand-alone building. The preliminary site design shows the large anchor store located on the north end of the 75-acre property, backing up to the irrigation ditch. The movie theater will be on the east side, slightly northeast of the Dillard's; smaller mini-anchors will be to the south and west of Dillard's; and in the center-west portion of the property, along Hover Street, there will be a large plaza encircled by smaller shops and restaurants.

Per the agreement, construction -- not just demolition, but construction -- must begin by the end of this year, and the project must be at least 85 percent completed by the end of 2015.

The project is expected to run about $80 million, and the city has agreed to contribute up to $27.5 million of that. The city will issue bonds that will be repaid over 25 years by the additional sales and property tax generated by the mall -- known as tax increment financing, or TIF -- and by a mill levy the mall will place on itself. No debt will be issued until the conditions outlined in the agreement are met by NMMS.

"While the entire agreement was important -- we spent an immense amount of time over 21/2 months working on it -- that Attachment D (which contains all the conditions) was the heart of the agreement," said Brad Power, the city's economic development director. "That was where there was the most back and forth."

Different pursuits of the same objective

Neither Power nor Starnes was with the city when the mall's previous owner, Panattoni Development Co., was proposing to partner with the city on the mall's redevelopment. And both men brought expertise to the negotiations with NMMS the city did not have before. Power previously held basically the same job with the city of Boulder, so he was around for the transformation of Crossroads Mall into Twenty Ninth Street. Starnes' specialty is redevelopment projects, and he's done them from both sides of the table, having represented both the private developer side and the government side.

City manager Harold Dominguez and finance director Jim Golden were also heavily involved in the negotiations with NMMS, as were multiple city staffers from several departments, including the city attorney's office.

On his side, Ginsborg said that of the 100 or so people in his company, about 15 of them have been dedicated to the Twin Peaks Mall redevelopment, including himself and the other two principals in the company.

"At any one time there were probably 13 or 14 people (from both sides) working on the document itself, and half or more were lawyers," Ginsborg said last week.

He equated the negotiating process to "herding cats."

"We all have the same objectives," Ginsborg said. "We all stand to benefit from the outcome, for different reasons."

Added Starnes, "You want to have a playing field where everyone's interests are aligned. Obviously, you're going to have (some) differences of opinion between a public and private standpoint."

Projections have the city drawing $92 million in new revenue over the 25-year lifetime of the TIF, and that's not counting the funds that will be generated to pay off the bonds.

"For us, this project will be financially profitable when it's done, when it's leased," Ginsborg said. "We'll make our money on the last 10 percent of the space, and that's the way it always is with our company."

Added Power, "If (NMMS) is very successful, that only means it's better for us."

From the city's standpoint, the plan will accomplish the three primary goals his team had heading into the negotiations, Power said. City Council has, for years now, expressed a desire to see the site be redeveloped. Revenue at the mall has been dropping steadily for more than a decade.

Second, Power said, the city was willing to put up a financial stake in the site's redevelopment but only if it returned a healthy return on its investment.

Finally, he said, it was to implement the Urban Renewal Plan that was put into place in 2009 for that part of the city. The goal of that plan is to cure blight, and a blight study of the mall property completed in October found that the site met nine of the 11 criteria for blight, according to state statute.

"Our responsibility is to the property -- its position in the community and its role in the community," Power said.

While the agreement signed with NMMS includes only the mall property, the entire large block surrounding the mall property is part of the Urban Renewal Plan. The other property owners on that block --bordered by Nelson Road on the north, Sunset Street on the east, Ken Pratt Boulevard on the south and Hover Street to the west -- could also qualify to be part of a public-private partnership.

"We're hoping this spurs other development in the area," Power said. "The market has to support it."

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